What if  "The Long Term Returns for U.S. Stocks and Bonds Turn Out to be Dismal"  was a dilemma posed in an article by Penelope Wang in the Money magazine Investment Guide 2013 issue.  

Hardly rhetorical, Rob Arnott, Chairman of Research Affiliates, was quoted in Wang's Money piece as cautioning that, "Stock returns are likely to average 4% to 6%."  For those wanting more from their investment dollar, there is real estate investing.This has been the history of investing in asset classes, even though Arnott is predicting for the future.

Over the past 200 years, real estate has created about 90% of the world's millionaires.  During The Great Recession, as stocks and bonds fell in value, the level of rental income in the United States actually increased.  Traditionally, rental income in the United States rises about 5% annually.

In addition to its history of outperforming stocks, bonds and other asset classes, real estate is a far more flexible investment.  With private mortgage notes, loans made by investors to those buying properties, the terms can be structured however the two parties want.  By contrast, when buying a stock or a bond, the terms of the security are well established for the buyer to either accept or go elsewhere.

Passive investing for the long term increases the appeal of real estate.  The longer a small apartment building is owned, the more the rent will increase.  Should rents increase 5% annually for a property, that means the rental income will double in less than 15 years.  If the mortgage is a 15-year note, that means that just as it is being paid off, the rental income is more than twice what it was in year one.  For a four-unit apartment with each renting for $1000 a month in the first year, that means by the time the mortgage is paid off, rental income will be over $100,000 annually.

For real estate investing that features private mortgage notes, the income increases even more.  For EquityBuild Finance, the funding arm of EquityBuild, a real estate investment firm, private mortgage note returns have been in the double digits.  If at 12%, that means the investment doubles every six years.  For a stock returning 4%, it would require almost two decades for this level of yields to double the investment.

Unlike stocks, real estate can pay for itself with the rental income.  Real estate can also be bought with much less cash as a percentage of the purchase price than stocks, too.  Stocks require 50%, while a primary residence property can be bought with 5% down.  That increases the buying power of the capital of the investor.

As detailed in another article on this site, real estate is "The Great Equalizer" in investing.  It is the easiest way for an individual to become an investor.  History proves that it creates the most wealth for individual investors, too.  With stock returns looking so paltry for the future, real estate investing again looks the most promising of all the asset classes!